Courtesy of Cornell University

Steve Israel (D-N.Y.), Director of the Cornell Institute of Politics and Global Affairs

July 14, 2020

Cornell Policy Experts Assess the State of the U.S. Labor Market

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The U.S. labor market is “showing strength one day and weakness the next,” said former Congressman Steve Israel (D-N.Y.), who currently serves as Director of the Cornell Institute of Politics and Global Affairs.

This includes business trends like automation of factory jobs and increasing globalization. Due to these factors and the current instability in the labor market, the full effects of the pandemic on the economy are still unclear.

”It will be impossible to determine the true impact of coronavirus across key economic sectors for another three to six months because that is when the uncertainty and volatility of the market will have settled down,” Israel said.

In May, the unemployment rate declined by 1.4 percentage points from April and total nonfarm payroll employment increased by 2.5 million. The number of unemployed persons who were on temporary layoff decreased by 2.7 million during the same month and the number of unemployed persons who were jobless for less than five weeks decreased by 10.4 million.

Meanwhile, employment rose in key industries by six figures in leisure and hospitality, construction, education and health services, retail trade and manufacturing. These numbers and trends indicate a slight reversal after record losses in the U.S. labor market in April.

Despite suggestions that these recent gains signal a recovery in the U.S. labor market, there is still debate surrounding the velocity of a potential recovery. “We still have a long way to go…it’s not going to be a V-shaped recovery, ” said Eli Lehrer ’98, president of the R Street Institute, a conservative think tank based in Washington, D.C.

As previously closed businesses reopened, the labor market reversed a mass number of layoffs caused by the suppressed demand during the nation’s lockdown. Consumer demand experienced the largest monthly gain in May — 8.2 percent — after the single biggest monthly drop in April, 12.6 percent.

Lehrer attributed this phenomenon to the role consumer spending plays in driving the economy and to the employment gain in general merchandising like Walmart, Costco and Target.

The reversal in unemployment trends has also been linked to the emergence of online merchandising as the primary form of retail shopping.

“Brick and mortar stores have been replaced by consumers sitting at home and ordering items online through Amazon, which in turn has increased the demand for workers in Amazon warehouses, distribution centers, shipping intermediaries, and delivery companies,” Israel said.

Additionally, he explained that the high demand in certain microsectors, including face masks, telecommunications and videoconferencing could also drive gains in employment.

But on a wider scale, the U.S. labor market experienced volatility amid the coronavirus pandemic as American employers shed nearly 20.5 million jobs in April and the unemployment rate rose to its highest level of 14.6 percent since the Great Depression. Policy makers in Congress from both political parties worked to implement bipartisan policies to limit the economic impact of the pandemic.

Recent bipartisan legislation passed by Congress such as the CARES Act, the Paycheck Protection Program and stimulus checks effectively “staved off mass unemployment, provided a lifeline of financial assistance to individuals and to small businesses in order to keep them afloat, and most importantly, prevented a further dive into an economic recession, to levels comparably worse than the Great Depression,” according to Israel.

Lehrer thought that the stimulus checks were the most effective policy initiative because they “played a role in juicing consumer spending, which has resulted in the increased ability of consumers to make purchases that they might not have been able to make otherwise.”

In order to continue toward a path to economic recovery and return to pre-pandemic employment levels, there are specific areas where resources can be directed towards achieving desired targets, according to Lehrer.

“Efforts should be geared directly towards individuals coupled with narrowly targeted efforts towards employers,” he said. Lehrer believed the key problem in the U.S. economy is the relative low levels of labor force participation for men without college degrees.

To encourage people with no college degrees to work, Lehrer recommended policies which support men who do not obtain four-year degrees to look at skilled jobs like dental hygienists and other health careers that don’t require four-year degrees.

Israel advocated for greater investment in infrastructure and pointed to the $1.5 trillion transformative infrastructure bill introduced June 30 by House Democrats as essential legislation to achieve equitable prosperity. The legislation calls for investment in programs, projects and materials that emphasize resiliency while reducing carbon pollution from the transportation sector.

Innovative policies and legislation are not the only actions legislators need to take in order to accelerate the U.S. labor market’s recovery — how the economy is reopened plays a key role as well.

“[The reopening] must be done in phases and requires strict adherence to the guidelines and protocol because if the process is rushed, it will need to be restarted from the beginning,” Lehrer said.

Israel also stressed that it is “absolutely imperative that the appropriate economic strategies are implemented and in the right manner, so that the economy may adapt, strengthen and become relatively fairer for all people regardless of wealth”.

Correction, July 15, 3:36 p.m.: A previous version of this article omitted “Congressman” before the first mention of Steve Israel. It also contained an error in the title of the Cornell Institute of Politics and Global Affairs. These article has since been updated.